ARBITRATION AGREEMENT

Model Law Chapter II, Articles 7-9

“Arbitration agreement” is an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

Definition of arbitration agreement Art. 7(1)

a) may be in the form of an arbitration clause in a contract, or

b) in the form of a separate agreement

Form of arbitration agreement Art. 7(1)

(2) The arbitration agreement shall be in writing.

(3) An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.

Art . 7(2-6)

(4) The requirement that an arbitration agreement be in writing is met by an electronic communication if the information contained therein is accessible so as to be useable for subsequent reference; “electronic communication” means any communication that the parties make by means of data messages; “data message” means information generated, sent, received or stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic data interchange (EDI), electronic mail, telegram, telex or telecopy.

Art . 7(2-6)

(5) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of statements of claim and defence in which the existence of an agreement is alleged by one party and not denied by the other.

(6) The reference in a contract to any document containing an arbitration clause constitutes an arbitration agreement in writing, provided that the reference is such as to make that clause part of the contract.

Art . 7(2-6)

it does not apply if the place of arbitration is either

undetermined or located in a foreign jurisdiction. Nevertheless, courts have occasionally applied article 7 while considering agreements which purported to provide for arbitration in a foreign jurisdiction.

Scope of application of article 7

It is a cardinal rule that arbitration is a matter of contract, and parties are bound by arbitration awards only if they agreed to arbitrate the matter.

An agreement to submit to arbitration generally produces effect only upon the parties, their heirs and assigns.

Importance of arbitration agreement

In circumstances where, under the applicable law, such party is estopped to assert the contrary, such as when there is some form of assent to the agreements; when the party raising the issue of its existence engaged in activities consistent with the terms of the arbitration agreement

When agreement exists although not signed by one or both parties

When the competent arbitral tribunal is ambiguously determined or ambiguously determinable

When arbitration agreement is unenforceable

a) 3rd party rights and obligations under arbitration agreements in contracts which bestow benefits on 3rd party beneficiaries or stipulation in favour of a 3rd party (stipulation pour autrui)

b) 3rd party rights and obligations under arbitration agreements following the assignment or novation of the underlying contract to the 3rd party

When are 3rd parties bound by arbitration agreement?

a) 3rd party rights and obligations under arbitration agreements where the 3rd party exercises subrogated rights

b) rights and obligations under arbitration agreements where interests in contracts are asserted by successors to parties, following the merger or demerger of companies, so that the corporate entity is no longer the same

When are 3rd parties bound by arbitration agreement?

The parties must have intended the arbitration agreement to form part of the contract

When is there incorporation by reference?

Yes. By becoming a member of the association, he deemed to have consented to them regardless of whether he had seen the rules or had obtained a copy or such rules.

No. Only those who approved are bound by it

Whether or not a member of an association

is bound by the association rules

No. Principle of separability of the arbitration agreement

When contract is terminated, is the arbitration agreement also terminated?

Articles 8 and 9 pertain to the relationship between the arbitration agreement and court intervention. When a party to an arbitration agreement initiates litigation, Article 8 obligates the court, upon request, to refer the dispute to arbitration unless it finds the agreement "null and void, inoperative or incapable of being performed."

(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

Article 8. Arbitration agreement and substantive claim before court

Means the matter that is raised before the court which is the subject matter of the arbitration agreement

Same subject matter

Subject matter

A first condition, which is substantive in nature, requires that the subject-matter of the dispute fall within an arbitration agreement which is neither null and void, inoperative nor incapable of being performed.

A second condition, which is procedural, requires that the referral to arbitration be sought no later than when the party requesting it submits its first statement on the substance of the dispute.

Conditions for referral to arbitration

Special ADR rules provide that in referring the parties to arbitration, the court shall stay the action

Referral to arbitration

(1) No consent or no valid consent to the alleged arbitration agreement

(2) Arbitration agreement not validly transferred to the party making the referral application or to the party responding thereto

(3) Formal requirements not met

circumstances under arbitration agreement found to be non-existent, null and void,

inoperative or incapable of being performed

(4) Condition precedent to the arbitration agreement taking effect not fulfilled

(5) Arbitration agreement no longer in effect

(6) Arbitration agreement invalid because the dispute is not arbitrable

circumstances under arbitration agreement found to be non-existent, null and void,

inoperative or incapable of being performed

(7) Arbitration agreement invalid because it is abusive or unconscionable

(8) Arbitration agreement invalid because of the invalidity of non-severable provisions thereof

(9) Arbitration agreement designating an arbitral institution or appointing authority that is either nonexisting or uncooperative

circumstances under arbitration agreement found to be non-existent, null and void,

inoperative or incapable of being performed

(10) Failure to commence arbitration within the deadline provided for in the arbitration agreement

The foregoing will be decided in accordance with the national law of a particlar State.

circumstances under arbitration agreement found to be non-existent, null and void,

inoperative or incapable of being performed

1. Law of the Forum(courts) 2. Place of Arbitration 3. Both 1 and 2

Ans. The Working Group suggests, No. 2 and Articles 34(2)(a)(i) and 36(1)(a)(i) specify the law of the place where the award was to be made as the one to govern the issue of validity unless the parties have chosen another law.

What national law???

Applied Strictly(travaux préparatoires) , Ideally (jurisprudence).

In the case of Seine River Resources Inc. v. Pensa Inc., a 2002 decision, the court expressly held that the timeliness requirement under article 8 ought not to be applied strictly.

It treated as admissible a referral application filed months after the party seeking a referral order had filed its statement of defence. To the court, the fact that the party seeking a referral order had expressed in its statement of defence its intention to invoke the arbitration agreement sufficed.

Procedural requirement: Application.

In the case of Societe General de Surveillance, S.A. v. Raytheon European Management Sys. Co., it was stated that the power of th court to enjoin arbitration “is concomitant to the power to compel arbitration where it is present.”

Under RA 876, the injunctive jurisdiction of the court is less open to challenge. (Sec. 25)

Presumption of arbitrability.

Any doubt regarding the validity of arbitration should be resolved in

favor of arbitration.

MOSES H. CONE MEMORIAL HOSPITAL v. MERCURY CONSTRUCTION CORPORATION

“The Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.”

Presumption of Arbitrability

Period moved to the date of pre-trial conference.

Why? 1. Short time span for filing an answer. 2.Better vantage point for assessment. 3.Rules of Court, during this stage, the

viability of settling the disputeis conidered.

Procedural Requirement under the ADR Act

Article 8 obligates the court, upon request, to refer the dispute to arbitration unless it finds the agreement "null and void, inoperative or incapable of being performed."

UNCITRAL modeled Article 8 after Article II(3) of the 1958 New York Convention, although it included several additional elements.

In short...

First, the model law imposes a time restriction: the opposing party must request the court to decline jurisdiction prior to or with his first statement on the substance of the dispute. Should the party fail to invoke the arbitration agreement within the specified time, he is precluded from raising it as a defense in the ensuing court proceedings.

Second, even if a jurisdictional issue is pending before a court, Article 8 paragraph (2) provides that the arbitration may be commenced or continued.

Article 8. Arbitration agreement and substantive claim before court.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.

In the Philippines

Philippine Arbitration Law

a party to an arbitration proceeding which questions its actions may go to court and secure a temporary injunction prohibiting the arbitral tribunal from proceeding with the arbitration until the court has ruled on the action.

UNCITRAL Model Law

where an action has been brought before a court, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court (Article 8, par.2)

Another noteworthy issue involves multiparty situations when not all are bound by an arbitration agreement.

Action may be commenced against those not bound by the agreement as stated in the case of Del Monte Corporation-USA v. Court of Appeals.

Multi parties

In interpreting the Act, the court shall havedue regard to the policy of thelaw in favor of arbitration. Where action is commenced by or against multiple parties,one or more of whom are parties to an arbitration agreement, the court shall refer to arbitration those parties who are bound by the arbitration agreement although the civil action may continue as to those who are not bound by such arbitration agreement.

Setion 25 of ADR Act

Should an action becommenced in the Philippines notwithstanding the commencement of arbitration proceedings outsie the Philippines, the court should bear in mind that the Philippines had adhered to the 1958 New York Convention.

To wit:

Arbitration Commenced in foreign State

1. “Each contracting State shall recognize an agreement in writing in which the parties undertake to submit to arbitration all or any differences whichhave arisen or which may arise between them in respect of a efined legal relationship, whether contractualor not,concerning a subject matter capable of settlement by arbitration.”

2.”The term ‘agreement in writing’ shall includeall arbitral clause in a contract or an arbtration agreement, signed by the parties or contained in an echange of letters or telegrams.”

3. “The ourt of a Contracting State, when seized of an action in a matter in respect of which theparties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration,unless it finds thatthe said agreement is null and void, inoperative or incapable of being performed.”

It is important to note that Article 8 would require courts of the adopting State to refer all valid agreements to arbitration, and not just those agreements where the adopting State is also the forum State. If widely accepted, this provision would constitute a significant step toward global recognition of international commercial arbitration agreements.

Article 9. Arbitration agreement and interim measures by court It is not incompatible with an arbitration agreement for a party to request, before or during arbitral proceedings, from a court an interim measure of protection and for a court to grant such measure.

Article 9

Article 9 makes it clear that a request for interim measures of protection by a court is compatible with the arbitration agreement. UNCITRAL recognized that interim protection may often be necessary to secure the efficacy and success of the arbitration, and that the arbitration agreement should not operate to exclude court jurisdiction, nor should a party's request for such court action be construed as a waiver of that agreement.

Article 9 however does not specify which interim measures are available. It only states that courts may employ those measures which are appropriate under national law, or are compatible with the agreement.

Article 17 gives the arbitral tribunal a concurrent power to order interim measures of protection, although the range of such measures is more limited than those provided for under Article 9. The text requires that the interim measure pertain to the subject-matter of the dispute, and the measure may only be directed to a party. Additionally, the arbitral tribunal lacks power to enforce these orders. As a result compliance may require assistance of the courts, assuming the national procedural law gives the court the authority to act.